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Updated: 21 Mar 2023
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Simon Kuznets was born
in Pinsk, a city in the Russian Empire.
we study economic and statistics in
the University of Kharkiv now located in
Ukrain. he would not stay in the countrie
he was born not even tho he had a promising
academic record.the Vladimir Lenin’s Red Army had won
a year long war (civil war) in Russia. with
the Soviet Union in the making, Kuznets,
like thousands of others, emigrated to
the US. There, he first got a PhD in
economics at Columbia University,
and then joined the National
Bureau of Economic Research
(NBER), a well-respected
economic think tank.His timing was perfect. In the
time after his arrival, the
US grew to become the leading
world economy. Kuznets was
there to help the country make
sense of the newly found position.
He pioneered key concepts that
dominate economic science and
policy making to this
day and became one of the
world’s most prominent economists.When Kuznets arrived in the US,
the country was on an economic
high; it came out of the First World
War swinging. US manufacturers
introduced goods, such as the cars
and the radio, to the country’s
huge domestic market, selling them
to a public hungry for modern goods.
Aided by spirit of free trade and
capitalism, the US soon became
the world’s leading economy.But the heady experience of the
Twenties soon turned
into the impacting Great Depression.the U.S. economy had
spiraled out of control.The context was one of
economic extremes. A bunch of people
ls, such as oil magnate John D. Rockefeller,
bank titan John Pierpont Morgan
and steel giant Andrew Carnegie,
controlled massive amounts of
wealth and economic responsibilities,
while many workers had a much
more precarious existence,
still often depending on payday
jobs and agricultural harvests.Moreover, an ever-rising
stock market, not backed
by any similar trend in the real
economy, meant financial
speculation was reaching a fever pitch.the stock market crashed and set in motion
a chain reaction all over the world.
People defaulted on their obligations,
credit markets dried up,
unemployment went down hill,
consumers stopped
spending money, protectionism mounted,
and the world entered a crisis from
which it would not recover until
after World War II.During the remainder of the 1930s,
other economists helped
standardize and popularize it,
and by the time the Bretton
Woods conference was held in
1944, GDP was confirmed as the
main tool for measuring economies around the world.As US policymakers grappled
with how to contain and end the crisis at home,
they lacked the answer to a
fundamental question: how bad
is the situation, really? And how
will we know if our policy
answers work? Economic metrics were scarce,
and GDP – the measure we use
today to value our economy – had
not been invented.Enter,
Simon Kuznets. An expert in
statistics, mathematics and
economics, he developed a
standard way of measuring
the gross national product or
GNP of the US. It would give an
Since then, GDP has become something
of a talisman. When GDP is growing, i
t gives people and companies hope,
and when it declines, governments
pull out all the policy stops to
reverse the trend. Although there
were crises and setbacks,
the story of the overall global
economy was one of growth,
so the notion that GDP growth
is good, reigned supreme.In the 30 or so years after the
Second World War, reporting
GDP was a recurring triumph,
especially in the West. It was the
“Golden Era of Capitalism” in
America, the “Wirtschaftswunder”
in Germany, and the “Trente
Glorieuses” in France. Nominal
GDP growth could reach 10% or
more, and in real, inflation-adjusted
terms still often topped 5%. But
there is a painful end to this story,
and we could have foreseen
it had we better listened to
Kuznets himself.long before the Bretton Woods
Agreement – and before even
the scepter of war – Kuznets
warned US Congress not to focus
too narrowly on GNP or GDP:
“The welfare of a nation can
scarcely be inferred from a
measure of national income,”- he stated
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